WASHINGTON (AP) ? Ben Bernanke says the Federal Reserve is sticking with its plan to hold interest rates at record-low levels until at least late 2014, despite a pickup in hiring that’s steadily lowered the unemployment rate.
The Fed chairman’s twice-a-year economic report to Congress, delivered Wednesday to the House Financial Services Committee, mostly mirrored his remarks in January after the Fed pushed back its timetable for any rate increase.
Bernanke acknowledged that unemployment, now at 8.3 percent, has fallen faster than the Fed had predicted. He says the Fed doesn’t expect the rate to continuing falling as fast this year. But if it does, he says the Fed would reassess its economic outlook.
“In light of somewhat different signals received recently from the labor market than from indicators of final demand and production … it will be especially important to evaluate incoming information to assess the underlying pace of the economic recovery,” Bernanke said in his prepared remarks.
Lawmakers and some economists have begun to question whether keeping rates that low for that long will heighten the risk of inflation, especially if the economy continues to improve and companies keep hiring.
Some economists think the Fed will reconsider its 2014 target for raising interest rates if job growth continued to strengthen.
The unemployment rate has fallen for five straight months and employers have added an average of 200,000 net jobs per month from November through January. Many economists are predicting that trend carried over into February.
Consumer confidence rose this month to the highest point in a year, which should lead to more spending and faster growth. Stocks have been surging ? the Dow Jones industrial average on Wednesday closed above 13,000 for the first time since May 2008, four months before the financial crisis. Even the housing market is looking a little better.
Bernanke acknowledged those improvements. But he mentioned that risks remain. He said Europe’s debt crisis threatens global growth, the U.S. housing market remains depressed and gasoline prices are rising again, which will likely push inflation up temporarily while depressing consumers’ purchasing power.
Still, he said that the Fed continued to believe that longer-term inflation would remain subdued. He said maintaining a policy that keeps rates low for an extended period “tended to put downward pressure on longer-term interest rates.”